Flury of WTO domestic regulatory autonomy cases continues: Ontario’s feed-in tariff program illegal

Just before the Christmas break, a WTO Panel ruled at the request of Japan and the EU that Ontario’s feed-in tariff program is illegal under the GATT and TRIMs agreement.  Feed-in tariff programs are a popular means to boost renewable energy. Typically, they imply that producers of renewable energy are nurtured through preferential, long-term and advantageous electricity purchase contracts (either through obliging private electricity distributors to enter into such contracts, such as in the infamous European PreussenElektra case, or such as in the case of Ontario’s law, through employment of a Government Agency which enters into these contracts). Governments are often tempted to throw ‘local content requirements’ into the mix: in the case of Ontario, domestic content requirements must be complied with in the design and construction of the relevant electricity generation facilities utilizing solar photovoltaic and wind power technology in order to qualify for guaranteed electricity prices offered under the FIT Program.

The Panel rejected the EU’s claim with respect to Subsidies, however it did accept that the regime infringed GATT Article III, as well as the Agreement on Trade-Related Investment Measures. The former to me was no great surprise. Infant industry arguments are often made with respect to renewable energy however these do not in my view carry much weight with respect to either solar, wind or hydropower. The finding on TRIMS is encouraging: it shows that the Agreement (I sometimes dub it a mini-MAI) does have some bite.

The EU has had internal issues with feed-in tariffs and the like (see e.g. my paper here on (di)similarities between EU and WTO law on the matter), and (update 5 May 2015) in the UK the Courts are considering the extent to which Article 1 of the first Protocol to the European Conention on Human rights (‘A1P1’), which protects property, shields investors in solar energy from changes in feed-in tariffs.

Geert.

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